Budgeting Tips to Avoid Bankruptcy
Constantly having to worry about your finances takes a toll on your health, relationships and even how well you perform at work. If you’re concerned that you’re on a path to bankruptcy, it’s important to understand that filing isn’t a decision you should take lightly. While it can be a useful tool when dealing with issues like insurmountable medical bills, it’s crucial to discuss filing for bankruptcy with a lawyer in Wilmington prior to taking action. There may be another option that’s a better fit for your specific situation.
In addition to seeking advice from an attorney in Delaware, it’s also worth noting that if your financial situation isn’t dire, but youâ€™re concerned that it could take a turn for the worse in the not too distant future, now is the time to take action. By getting serious about your budget, you can not only prevent yourself from going deeper into debt, but you can actually start paying off debt and working to get back in financial control.
To get your finances moving in the right direction, here’s exactly what you need to do:
Know How Much You Owe
You can’t tackle an obstacle if you don’t know exactly how big it is. That’s why it’s so important to figure out exactly how much you owe. Although this can be painful to do, getting clarity is the only way you’re going to start making progress.
Create the Core of Your Budget
Once you know how much you owe, the main tool you’ll use to tackle your debt is a budget. When it comes to creating your budget, the four main categories you need are fixed expenses, incidental expenses, debt repayment and savings. It is important to have some money saved, but paying off your debt should be your current focus â€”this should be the category you emphasize.
Minimize Your Incidental Expenses
The fixed expense category of your budget covers items like your rent or mortgage. If you’re renting, it may be possible to get a roommate or move to a more affordable place. But if you have a mortgage, that’s generally not an expense you can change. Instead, focus your attention on reducing your incidental expenses. Once you start tracking how much you spend on things like food, clothes and entertainment each month, you may be shocked by the totals. Although it can catch you off guard, the good news is if you’re spending a lot on expenses like eating out, those are easy to cut. You can then put that money towards paying off debt.
Be Strategic About Paying Off Debt
Once you start having money that you can put towards paying off debt, don’t be afraid to negotiate with lenders. Even though it may not feel like it, getting serious about your finances puts you in control. Instead of accepting high interest payments, negotiate to reduce those amounts so you can focus on paying off your principal. And if you aren’t able to get the terms you want, consider contacting a debt relief professional to help negotiate on your behalf.